Bidding 87% on HUD deals

6 Replies

I've read a lot about this, and know that HUD generally automatically accepts offers of 87-88% Anything lower is either countered or manually accepted later.

Say the asking price is $100,000. Is the 87% rule as simple as $87,000, or does one need to take commissions into account? If so, are HUD commissions generally 3% on each side. So if the price was $100,000, would one do this:

$100,000 x 0.87 = $87,000 x 1.06 = $92,220

I'd sure rather commissions come out of the 87k than get added on top :)

87% is the net to HUD so commissions are added to the net amount. So the lowest acceptable bid would be a little less than $93000

The Net. That is ALL HUD cares about is the net. So, your bid is further reduced by commissions and any closing cost concessions (which as an investor you won't have).

Keep in mind that in cases where the purchase price is low, HUD will often times offer a minimum commission amount to make it worth the time of either broker. This is usually $1,000-$1,200. It will usually tell you on the listing if a Broker minimum or bonus is offered on a property, and what it might be.

Also, you need an agent who is authorized to bid in that market to submit your bid for you. They need to be registered with HUD by their NAID #.

Originally posted by @Greg H.:

87% is the net to HUD so commissions are added to the net amount. So the lowest acceptable bid would be a little less than $93000

My only other question is this "little less than $93,000". Are HUD commissions generally 6%, 6.5%, 7%? What's a "safe" number?

Originally posted by @Cara Lonsdale :

The Net. That is ALL HUD cares about is the net. So, your bid is further reduced by commissions and any closing cost concessions (which as an investor you won't have).

Keep in mind that in cases where the purchase price is low, HUD will often times offer a minimum commission amount to make it worth the time of either broker. This is usually $1,000-$1,200. It will usually tell you on the listing if a Broker minimum or bonus is offered on a property, and what it might be.

Also, you need an agent who is authorized to bid in that market to submit your bid for you. They need to be registered with HUD by their NAID #.

Thanks Cara. Good advice. Actually my only investment purchase to date was a HUD house, so I get the process. Being out of state, I sure am glad they went to electronic signatures!

Originally posted by @Pat Jackson :
Originally posted by @Greg H.:

87% is the net to HUD so commissions are added to the net amount. So the lowest acceptable bid would be a little less than $93000

My only other question is this "little less than $93,000". Are HUD commissions generally 6%, 6.5%, 7%? What's a "safe" number?

I have done a few HUD deals as an agent and the commission can differ but not usually. One that I am looking at now for reference is listing a 3% commission. However, when the agent is submitting your bid, they do have the option to change THEIR side (the buyer's agent side) and the listing side is a static 3%. Hope this makes sense and helps.

Short answer, a 6%  commission calculation is a safe bet.

Originally posted by @Pat Jackson :
Originally posted by @Cara Lonsdale:

The Net. That is ALL HUD cares about is the net. So, your bid is further reduced by commissions and any closing cost concessions (which as an investor you won't have).

Keep in mind that in cases where the purchase price is low, HUD will often times offer a minimum commission amount to make it worth the time of either broker. This is usually $1,000-$1,200. It will usually tell you on the listing if a Broker minimum or bonus is offered on a property, and what it might be.

Also, you need an agent who is authorized to bid in that market to submit your bid for you. They need to be registered with HUD by their NAID #.

Thanks Cara. Good advice. Actually my only investment purchase to date was a HUD house, so I get the process. Being out of state, I sure am glad they went to electronic signatures!

 The listing agent commission is fixed at 3% with a minimum of $1000.  So the minimum commission for the listing agent is $1000

The selling agent(Your agent) is up to 3% or the $1000 minimum.  So you can work a deal with your agent

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here